Yuzu Hair & Beauty Limited v Selvathiraviam EWHC 772 (Ch)

Zacaroli J sitting in the Chancery Division of the High Court of Justice granted a dissolved company which had been struck off the Register a Freezing Injunction. This appears to be the first order of its kind and it has resulted in cited authority in Paragraph 25.1.25.1 of the White Book 2020.

The Claimant Company (Yuzu) applied for the continuation of a Freezing Injunction which it had obtained against its former Accountant, who was suspected of defrauding Yuzu of more than £300,000. The Claimant had a pending application made by a director and shareholder, to restore it to the Register under Section 1029 of the Companies Act 2006.

Zacaroli J found that there was compelling evidence that the Defendant had defrauded the Claimant Company in excess of £300,000 and further, the Defendant had by his failure to file accounts, caused the Claimant Company to be struck off.

In granting the original Freezing Injunction, Falk J did so on the pragmatic basis that the effect of the restoration, if granted, would be retrospective. However, Zacaroli J preferred a different approach to resolve the problem that at the time it was being asked to make and continue the Freezing Injunction, the Claimant Company did not exist.

However, and despite the above, the Zacaroli J held that under Section 37 of the Senior Courts Act 1991, the Court had jurisdiction to make a Freezing Injunction in the context of the application to restore. He considered that it was wide enough to justify an Order being granted to the Claimant in in order to freeze the assets of the Defendant against whom the Claimant, once it was restored, would have a claim as a result of the alleged fraud. To make the Order in favour of Yuzu, he allowed the former director to be a co-applicant so that it could be granted in favour of an existing legal person.

The assets of the Defendant included property. He is now at serious risk of losing his home as a result of the alleged fraud. Property of an individual or company is an essential asset that can be used by way of enforcement for debts or monies due.

Not only is the Defendant at serious risk of losing his home, but he is also serving an 18 months prison sentence at HMP Pentonville as a result of breaching the terms ordered by the Court in the Freezing Injunction.

Kavita Rana of Edwards Duthie Shamash was the Solicitor for the Claimant and Rory Brown of 9 Stone Buildings was the Claimant’s Counsel. The Judgment is the first known of its kind, in which such an Order has been made in the context of an application by a dissolved company, applying for a Freezing Injunction. The Judgment of Zacaroli J shows the pragmatic approach taken by the Court in making the Order, which was necessary to prevent an alleged fraudster making himself judgment-proof, in spite of considerable conceptual and practical difficulties.

A ‘Yuzu Order’ therefore demonstrates that even when a company is dissolved, it is not necessarily a bar to applying for a Freezing Injunction.